Armenia Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Trade with the EU represents 19% of the country’s foreign trade. In 2021, trade with EU countries grew by 23% and reached USD billion. The EU is thus the second largest trading partner. The share of EU countries in Armenian exports is less than 17% and in imports to Armenia roughly 20% (mostly from Germany, Italy, France and Poland). The balance is significantly against Armenia. Armenia exports the most mineral raw materials (copper, molybdenum), which represent a third of the total exports. It also exports foodstuffs (alcohol, tobacco). Precious stones, gold and jewelry represent the third largest item of export. Textile products are also exported to the EU. On the other hand, the country mostly imports machinery and equipment, as well as mineral raw materials and chemical products.

  • Allcountrylist: Overview of major industries in Armenia, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 704.9 846.9 784.9 715.8 753
Imports into the EU (million EUR) 387.5 369.9 403.9 340.3 452.4
Balance with the EU (million EUR) -317.4 -477 -381 -375.5 -300.6

Source: European Commission

Trade relations with the Czech Republic

For the Czech Republic, Armenia is one of the most important trading partners in the region, especially in terms of the export of electrical machinery and equipment (turbines for hydropower plants are an important export item). Armenian exports are rather modest, mostly clothes and textiles, alcoholic beverages (wine, brandy) or minerals. Mutual trade fell in 2015 as a result of Armenia’s accession to the so-called EAEU. After the improvement, a downward trend can be observed again from 2018. One of the effects of the pandemic, conflict and regional instability was a continued decline in mutual trade in 2021 compared to 2019 (by 25%), Czech exports decreased by 26%. In 2021, Armenia banned the import of certain types of meat, meat products, raw materials and feed from the Czech Republic. In our trade exchange with Armenia, a multiple surplus on the Czech side has been evident for a long time.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 0.1 1.6 1.2 1.1 ON
Imports to the Czech Republic (billion CZK) 0.9 0.1 0.2 0.1 ON
Balance with the Czech Republic (billion CZK) 0.8 -1.5 -1.1 -0.9 ON

Source: CZSO

Trade relations with countries outside the EU

Armenia’s largest trade partner is Russia ($billion, 20.9% growth). There is also significant trade with China (billion USD) and Iran (503 million USD).

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 1,201.6 1,206.7 1,459.4 1,446.5 2 105.6
Imports to countries outside the EU (million EUR) 3 167.9 3,850.4 4,282.8 3,534.9 4,345.6
Balance with non-EU countries (million EUR) -1,966.3 -2,643.7 -2,823.5 -2,088.3 -2,240.0

Source: EIU, Eurostat

Foreign direct investment

Currently, Armenia is not among the most attractive countries for foreign investment. The investment sphere in Armenia is regulated by the Law on Foreign Investments, adopted in 1994. The Armenian government applies an open door policy and tries to introduce more favorable conditions for foreign investors. Therefore, it has also developed a special platform called “eRegulations Armenia” (https://armenia.eregulations.org/), which provides a step-by-step description of the 18 most important procedures for investors. This platform should serve as a guide for those who intend to start a business in Armenia or expand their existing business activities.

The main part of foreign direct investment comes from Russia (which accounts for 65% of FDI), Italy and the Netherlands. Most of the investments made in Armenia come from these three countries, which shows the significant centralization and dependence on a few countries, but also the relatively low investment attractiveness of Armenia. Other sources of FDI include the United Kingdom, Canada, Italy, Cyprus and Germany. However, their share in the total investment volume is much smaller. Energy, mining and construction attract the largest share of foreign investments. Recently, the IT sector has also become attractive to foreign investors (especially after a number of Russian IT companies moved to Armenia) because Armenia has a cheap and skilled IT workforce.

FTAs and treaties

After the sudden rejection of the Association Agreement with the EU (DCFTA) in 2013, Armenia became a member of the so-called EAEU (Eurasian Economic Union) in 2015, where it is together with Russia, Belarus, Kazakhstan and Kyrgyzstan. Imports from these countries are exempt from import duties, while imports from third countries are subject to import duties and other conditions set (usually by Russia) under the EAEU.

Treaties with the EU

The contractual basis between the EU and Armenia is primarily the CEPA (Comprehensive and Enhanced Partnership Agreement), which entered into full force on March 1, 2021. CEPA represents a broad framework agreement and touches on a number of areas from democracy and the rule of law to trade and the environment. It enables stronger cooperation in sectors such as energy, transport, environment and trade. CEPA is linked to the country’s reform commitments. Its goal is to improve the quality of life in Armenia, strengthen the rule of law, improve the business environment and support greater connections between the EU and Armenia, especially in the fields of energy and transport. The EU’s preferential trade scheme, the so-called GSP+ (Special Incentive Arrangement for Sustainable Development and Good Governance GSP+), has been in operation since 2009. Thanks to it, Armenia benefited from the reduction of tariffs on a number of items and thus easier access to the EU market. Due to the progress made in Armenia, from the beginning of 2022, there is a gradual shift from GSP+ to the regime given by the CEPA treaty.

Contracts with the Czech Republic

Armenia does not recognize the validity of any treaty or agreement from the USSR period. In mutual relations, the agreements negotiated between the former Czechoslovakia and the USSR do not apply, thus a new contractual basis was created. Among other things, an agreement on the avoidance of double taxation was concluded.

Developmental cooperation

Armenia is a recipient of development aid, but currently (in the period 2018-2023) it is not among the priority countries of Czech development cooperation. The Embassy of the Czech Republic in Yerevan implements small local projects (e.g. in the field of agriculture). People in Need implements development projects (agricultural, tourism) from EU funds.

Prospective fields of study (MOP)

Transport industry and infrastructure

Infrastructure in Armenia, both in the cities and in the countryside, has been in need of comprehensive renovation and massive investment for many years. The current state of the Armenian transport network is very bad, sometimes truly pathetic; Therefore, Armenia is planning large investments and increased financing in infrastructure and connectivity, the plan is primarily the construction of a North-South road corridor with a total length of approximately 550 km. In the Sisian-Kajaran section alone, the construction of 27 bridges and 9 tunnels is planned. The sector is one of the EU’s priorities in the recovery plan, and many other international donors also contribute to it. Czech companies could supply bridges, structures, construction or transport technologies.

Energy industry

The energy sector in Armenia faces several challenges, including supply gaps, unreliability of electricity supply, low energy efficiency and the need to maintain affordable tariffs. Armenia has a minimum of its own energy resources and is thus highly dependent on imports. About 40% of the electricity is generated by the Metsamor nuclear power plant. The government has set itself the goal of developing domestic and renewable energy sources (especially hydro and solar), in which Armenia has considerable potential, as well as introducing measures to improve energy efficiency. Czech companies could participate in tenders for the construction of solar power plants or supply components for hydropower plants.

ICT

The ICT sector in Armenia has been booming in recent years. The further development of the sector is also one of the government’s main priorities (Armenia also has a special ministry of high-tech industry), innovative start-ups are supported, and a major digital transformation of the country is also planned. The country has a number of talented programmers and developers of various specializations. The average salary of an IT professional in the private sector in 2020 was around 640 thousand AMD (roughly 29 thousand CZK). Salaries and prices for quality IT services are several times lower than in the Czech Republic, so it can be advantageous for Czech companies to outsource some IT services to Armenia.

Water management and waste industry

Waste management and waste management in general represent one of the biggest challenges for Armenia. The collection of municipal waste is at a relatively poor level, sorting and recycling is practically non-existent, and hazardous waste often ends up in ordinary waste, which then contaminates the surrounding environment. Similarly, wastewater often enters waterways. According to estimates, about 650,000 tons of unsorted municipal waste is generated annually in the country, the vast majority of which is landfilled. The European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the European Union (within the EU Neighborhood Investment Tool) are jointly financing a municipal waste management project called “Solid Waste Management in Yerevan.” In addition to the existing landfill in the Nubarashen location, a new landfill meeting all relevant standards was to be built. Two other large landfill construction projects are underway with the support of the EBRD and the EU in the provinces of Kotayk and Gegharkunik. Czech companies could supply, in particular, sorting lines, technologies for recycling and further utilization of waste, for soil remediation and wastewater treatment.

Healthcare and pharmaceutical industry

The Armenian market for medical supplies and medicines is relatively diverse. Local health authorities do not fully cover all procedures or medicines, so people have to invest in these items themselves. However, the government plans to introduce a public health insurance system, which should cover up to 90-95% of all health services and procedures. The government also plans to reconstruct a number of hospitals and health centers, where Czech companies could supply their medical devices and equipment. There are also a number of private clinics that are interested in purchasing modern Western medical products (mainly high-quality, effective, modern and innovative medicines, medical supplies, techniques and equipment).

Agricultural and food industry

Agriculture continues to be one of the key sectors of the Armenian economy, employing more than a third of the economically active population. At the same time, domestic production is not yet able to fully satisfy the demand for a number of (even basic) foodstuffs that are imported. State support aims to support agriculture with the aim of increasing productivity, income and competitiveness (especially orchard planting, drip irrigation or risk insurance). There is a growing demand for technologies for greenhouses (especially small and medium), cattle, food technologies, fertilizers.

Armenia Trade